Hertz profit rises, but 2016 outlook dims

MariaArmental

Hertz Global Holdings Inc. swung to a profit in the fourth quarter but cut its projections for 2016, citing continued weakness in its U.S. car rental business and the energy sector, which has driven down demand for its rental equipment.

The Naples, Fla., company, which has been trying to turn around operations following a yearslong restatement of results over accounting errors, said Monday it plans to press on with its cost-cutting push, targeting $350 million in cuts this year.

In 2015, it cut about $230 million in expenses, above its initial target.

Shares, which have lost nearly two-thirds of their value over the last 12 months, rose 1.8% to $8.65 in after-hours trading Monday.

For 2016, the car rental company projects adjusted corporate earnings before interest, taxes, depreciation and amortization of $1.6 billion to $1.7 billion with U.S. car rental revenue increasing 1.5% to 2.5%. That compares with its earlier view of $1.7 billion to $1.8 billion in adjusted Ebitda and a rental revenue increase of 2.5% to 3.5% in the U.S.

The guidance includes $600 million to $650 million, down from $625 million to $675 million, from the equipment-rental business that it plans to spin off by midyear.

Hertz, which had to adjust financial results dating to 2011 after discovering a series of accounting errors, rents cars under the Hertz, Thrifty, Dollar and Firefly brands.

Taking advantage of declining car ownership rates, Hertz has looked for growth in ride-sharing service providers. For example, last year it launched a pilot program in Last Vegas and Denver in which Hertz rented some of its cars to Lyft drivers at discounted rates.

Over all, Hertz reported a profit of $70 million, or 16 cents a share, compared with a loss of $234 million, or 51 cents a share, a year earlier. Excluding certain items, Hertz reported a profit of 5 cents a share, compared with a year-earlier loss of 22 cents a share.

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